Understanding the Commercial Agents Regulations

Whether you are an “agent” or acting under an “agency” depends on your course of dealings. In broad terms, you are an agent if you have the power to create, change or terminate the legal relations of another, the “principal”.

We are concerned in this article with “commercial agents”, being an individual, partnership or company who has continuing authority to:

• (i) Negotiate the sale or purchase of goods on behalf of the principal
• (ii) Negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal.

What are the Commercial Agents Regulations?

Commercial Agent relationships are currently governed in the UK by the Commercial Agents Regulations 1993 (“Regulations”). These Regulations are an EU-derived piece of legislation that, following Brexit, is now ‘assimilated’ under UK law.

The Regulations regulate the relationships between principals and commercial agents involved in the sale of goods; they do not concern the supply of services.

What is the effect of the Regulations?

The Regulations seek to enhance and protect the supposed “weaker” position of commercial agents in relation to their principals. They therefore imply certain terms into agency agreements, including:

• Remuneration and commission – provisions related to calculation of commission and when or how it is paid, including if the contract is silent on that matter. An agent may also be entitled to commission on transactions concluded after termination
• Compensation and indemnity – the agent’s default right to compensation or option of an indemnity on termination of the agreement in certain circumstances
• Right to a written contract
• Minimum termination notice periods for agreements on indefinite terms, which cannot be shortened by agreement
• Roles and responsibilities on the parties, such as a duty to act dutifully and in good faith towards the other
• Post-termination restrictions on trade clauses must be in writing, relate to geographical area, last no more than two years and comply with competition laws.

What these terms mean and how they are interpreted in practice, along with the application of other laws which may apply to commercial agency arrangements, requires consideration on a case-by-case basis.

Do the Regulations apply to you?

Given the complexities of the Regulations, parties should consider whether existing or proposed relationships come within the scope of the Regulations and what obligations may be implied on them under the arrangement.

Many of these implied terms cannot be overridden, excluded or “contracted out” of and will apply whether the agreement is oral or in writing. It is therefore essential to include careful wording within commercial agency agreements which reflect the parties’ true intentions whilst remaining within the scope of what is permitted.

Deregulation

There is currently a great deal of uncertainty about the future of the Regulations. In May 2024, the UK Department for Business and Trade launched a consultation on the Regulations, or rather, on their proposed deregulation.

The government’s appetite appears to be to amend the regulations so that they will continue to apply to existing principal-agent relationships falling under the regulations but not to commercial agency agreements after the effective date of the amending legislation.

Following the Labour Party’s win in the July 2024 UK General Election, the progress of this consultation is unclear.

The message however remains, if you are a party to an agency relationship you should consider how the Regulations as they stand apply to you.